Radical reform of the Southern African Customs Union (Sacu) revenue sharing formula is inevitable as criticism continues to mount.
It’s an arrangement between South Africa, Botswana, Lesotho, Namibia and Swaziland negotiated during South Africa’s apartheid era and has been heavily criticised over the years for either costing South Africa too much or crippling the rest of the region. It is estimated some 60-70% of the entire Swazi budget is dependent on the Sacu funding, making Swaziland and the other countries highly vulnerable to any downturn in South Africa’s economy.
According to Catherine Grant Makokera of Tutwa Consulting, South Africa does have to reform the funding mechanism around Sacu. Revised in 2002, it is dependent on South Africa for about 1% of its budget.
“If one looks at development assistance around the world and considers this 1% going to Sacu, South Africa becomes the largest donor in the world by as much as two times more than any other country,” said Makokera. “One has to ask whether the country can really afford to be the largest development donor on the planet.”
Very little leverage is gained through this arrangement, and the funds are paid in advance which means South Africa has no say over the spending in the various countries. When it comes to big trade agreements such as the European Union (EU) Economic Partnership Agreement with the Southern African Development Community South Africa only has 97% of its exports duty free, while the other Sacu countries received 100%.
Following the 2002 revision of Sacu, South Africa’s trade policy is directly linked to that of Sacu members.
“This is an important element that is often forgotten,” said Makokera. “Practically it means that South Africa – when having a Brexit discussion with the United Kingdom – has to do this as Sacu and not as South Africa. We have to talk to Botswana, Namibia, Swaziland and Lesotho before we can talk to the UK.”
With Botswana currently in the Sacu chair, this means they are leading this and other discussions of this nature on behalf of Sacu.
“Sacu is by far the most important relationship that South Africa has from a foreign policy point of view and yet it is the least talked about,” said Makokera. “South Africa not only has far less preferential access in some of the agreements, but when we negotiate deals and are able to act quickly, if the other countries do not ratify them South Africa has to wait until they have done so before any of the new applications apply.”
Makokera said whilst Sacu did pose several political challenges it was functioning fairly effectively.
Commenting on whether the union was likely to collapse should it be revised or reformed, she said that was an unlikely scenario.
